Moncrief Corporation bases its budgets on machine-hours. The company's static budget for July appears below:

Moncrief Corporation bases its budgets on machine-hours. The company's static budget for July appears below:

	Budgeted number of machine-hours.........	1,000
	Budgeted variable overhead costs:
	Supplies (@ $8.60 per machine-hour)...	$ 8,600
	Power (@ $8.80 per machine-hour).......	8,800
	Total variable overhead cost.....................	17,400
	Budgeted fixed overhead costs:
	Salaries...................................................	11,300
	Equipment depreciation.........................	9,900
	Total fixed overhead cost..........................	21,200
	Total budgeted overhead cost....................	$38,600
	Actual results for the month were:
	Actual number of machine-hours...........	1,200
	Supplies..................................................	$10,290
	Power.....................................................	$10,860
	Salaries...................................................	$11,690
	Equipment depreciation.........................	$9,990

      74. The variance for supplies costs in the flexible budget performance report for the month should be:

            A)      $30 F

            B)      $1,690 F

            C)      $1,690 U

            D)      $30 U

           

            Ans:  A    

            Solution:

           

            Budgeted number of machine-hours: 1,000

Actual number of machine-hours: 1,200

		Cost Formula (per machine-hour)	Actual Costs Incurred for 1,200 machine-hours	Budget Based on 1,200 machine-hours	Variance
	Variable overhead costs (Supplies)......	$8.60	$10,290	$10,320	$30 F

      75. The variance for power costs in the flexible budget performance report for the month should be:

            A)      $2,060 F

            B)      $2,060 U

            C)      $300 F

            D)      $300 U

           

            Ans:  D    

            Solution:

           

            Budgeted number of machine-hours: 1,000

Actual number of machine-hours: 1,200

		Cost Formula (per machine-hour)	Actual Costs Incurred for 1,200 machine-hours	Budget Based on 1,200 machine-hours	Variance
	Variable overhead costs (Power)	$8.80	$10,860	$10,560	$300 U

      76. The variance for equipment depreciation in the flexible budget performance report for the month should be:

            A)      $1,890 U

            B)      $90 F

            C)      $90 U

            D)      $1,890 F

           

            Ans:  C    

            Solution:

           

            Budgeted number of machine-hours: 1,000

Actual number of machine-hours: 1,200

		Actual Costs Incurred for 1,200 machine-hours	Budget Based on 1,200 machine-hours	Variance
	Fixed overhead costs  (Equipment depreciation).	$9,990	$9,900	$90 U

Use the following to answer questions 77-79:

Medlar Corporation's static budget for June appears below. The company bases its budgets on machine-hours.

	Budgeted number of machine-hours.........	8,900
	Budgeted variable overhead costs:
	Supplies (@ $2.20 per machine-hour)...	$  19,580
	Power (@ $3.80 per machine-hour).......	33,820
	Total variable overhead cost.....................	53,400
	Budgeted fixed overhead costs:
	Salaries...................................................	26,700
	Equipment depreciation.........................	39,160
	Total fixed overhead cost..........................	65,860
	Total budgeted overhead cost....................	$119,260

In June, the actual number of machine-hours was 9,300, the actual supplies cost was $19,760, the actual power cost was $35,720, the actual salaries cost was $27,130, and the actual equipment depreciation was $39,430.

      77. The variance for supplies cost in the flexible budget performance report for the month should be:

            A)      $180 U

            B)      $700 U

            C)      $700 F

            D)      $180 F

           

            Ans:  C    

            Solution:

           

            Budgeted number of machine-hours: 8,900

Actual number of machine-hours: 9,300

		Cost Formula (per machine-hour)	Actual Costs Incurred for 9,300 machine-hours	Budget Based on 9,300 machine-hours	Variance
	Variable overhead costs (Supplies)....	$2.20	$19,760	$20,460	$700 F

      78. The variance for power cost in the flexible budget performance report for the month should be:

            A)      $1,900 F

            B)      $1,900 U

            C)      $380 U

            D)      $380 F

           

            Ans:  C    

            Solution:

           

            Budgeted number of machine-hours: 8,900

Actual number of machine-hours: 9,300

		Cost Formula (per machine-hour)	Actual Costs Incurred for 9,300 machine-hours	Budget Based on 9,300 machine-hours	Variance
	Variable overhead costs (Power)...............................	$3.80	$35,720	$35,340	$380 U

      79. The variance for equipment depreciation in the flexible budget performance report for the month should be:

            A)      $1,490 F

            B)      $1,490 U

            C)      $270 U

            D)      $270 F

           

            Ans:  C    

            Solution:

           

            Budgeted number of machine-hours: 8,900

Actual number of machine-hours: 9,300

		Actual Costs Incurred for 9,300 machine-hours	Budget Based on 9,300 machine-hours	Variance
	Fixed overhead costs  (Equipment depreciation)...........................	$39,430	$39,160	$270 U

Use the following to answer questions 80-85:

A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

	Denominator level of activity...............................	1,000	DLHs
	Overhead costs at the denominator activity level:
	Variable overhead cost.......................................	$3,800
	Fixed overhead cost...........................................	$14,250

The following data pertain to operations for the most recent period:

	Actual hours..........................................................	1,200	DLHs
	Standard hours allowed for the actual output........	885	DLHs
	Actual total variable overhead cost.......................	$4,380
	Actual total fixed overhead cost............................	$12,450

      80. What is the predetermined overhead rate to the nearest cent?

            A)      $14.03

            B)      $16.83

            C)      $15.04

            D)      $18.05

           

            Ans:  D     LO:  5    

            Solution:

            Predetermined overhead rate = Total overhead ÷ Denominator level of activity

            = ($3,800 + $14,250) ÷ 1,000 DLHs

            = $18,050 ÷ 1,000 DLHs = $18.05 per DLH

      81. How much overhead was applied to products during the period to the nearest dollar?

            A)      $18,050

            B)      $16,830

            C)      $15,974

            D)      $21,660

           

            Ans:  C     LO:  5    

            Solution:

           

            Predetermined overhead rate = Total overhead ÷ Denominator level of activity

= ($3,800 + $14,250) ÷ 1,000 DLHs

= $18,050 ÷ 1,000 DLHs = $18.05 per DLH

Applied overhead = 885 DLHs × $18.05 per DLH = $15,974

      82. What was the variable overhead spending variance for the period to the nearest dollar?

            A)      $180 U

            B)      $180 F

            C)      $580 U

            D)      $580 F

           

            Ans:  B    

            Solution:

           

            Budgeted direct-labor hours: 1,100

Actual direct-labor hours: 1,200

Standard direct-labor hours allowed: 800

		Cost Formula (per DLH)		Actual Costs Incurred 1,200 DLHs	Budget Based on 1,200 DLHs	Spending Variance
	Variable overhead costs.................	$3.80	*	$4,380	$4,560	$180 F

* $3,800 ÷ 1,000 DLHs = $3.80 per DLH

      83. What was the variable overhead efficiency variance for the period to the nearest dollar?

            A)      $133 U

            B)      $580 U

            C)      $1,150 U

            D)      $1,197 U

           

            Ans:  D    

            Solution:

           

            Budgeted direct-labor hours:  1,000

Actual direct-labor hours:  1,200

Standard direct-labor hours allowed:  885

		Cost Formula (per DLH)		Budget Based on 1,200 DLHs	Budget Based on 885 DLHs	Efficiency Variance
	Variable overhead costs.................	$3.80	*	$4,560	$3,363	$1,197 U

*$3,800 ÷ 1,000 = $3.80

      84. What was the fixed overhead budget variance for the period to the nearest dollar?

            A)      $1,800 F

            B)      $3,268 F

            C)      $161 U

            D)      $4,650 U

           

            Ans:  A     LO:  6    

            Solution:

            Fixed overhead budget variance

            = Actual fixed overhead cost − Budgeted fixed overhead cost

            = $12,450 − $14,250 = $1,800 F

      85. What was the fixed overhead volume variance for the period to the nearest dollar?

            A)      $4,489 U

            B)      $1,618 U

            C)      $2,850 F

            D)      $1,639 U

           

            Ans:  D     LO:  6    

            Solution:

           

            Fixed portion of predetermined overhead rate

= $14,250 ÷ 1,000 DLHs = $14.25 per DLH

Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed)

= $14.25 per DLH × (1,000 DLHs − 885 DLHs)

= $14.25 per DLH × 115 DLHs = $1,639 U